CLSA Asia Investors Forum Las Vegas, February 2009

Transcription

1 Online Magazines Trade shows Research (NASDAQ-GS: GSOL) CLSA Asia Investors Forum Las Vegas, February 2009 Merle A. Hinrichs Chairman & CEO

2 Safe Harbor This presentation contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended and Section 21-E of the Securities Exchange Act of 1934, as amended. The company's actual results could differ materially from those set forth in the forward-looking statements as a result of the risks associated with the company's business, changes in general economic conditions, and changes in the assumptions used in making such forward-looking statements. 2

3 Changing Global Retail Market Changing Consumer Behavior Changing Retail Landscape New Supplier Selection Criteria New Export Strategies Fundamental, longterm changes Major decline in household wealth Very low confidence Buying less-expensive and/or store brands No/slow growth in Spending Shop more at discount retailers Changing product mix and price points Declining revenue and earnings Hard to obtain credit Reduced new product development Reviewing mix of on vs. offshore suppliers Reviewing supplier base Financially stable Lower-cost providers Diversify customer base, including more sales to developing countries Develop SCM expertise Assess competitive strengths & weaknesses Streamline product lines Enhance OEM/ODM Cost and value Will produce capabilities conscious Heavy discounting, smaller order sizes Fundamental changes lower prices in consumer spending Enhance demand capability to OEM & private label produce smaller orders Less use of credit dramatic changes Reducing in air shipments export operations expertise and Seek marketing strong credit line Accept longer & document financial High unemployment Intense focus on payment terms health inventory control Verify buyer s health Cash flow focus More own brand and private label Staff reductions Store closings Meet international standards Supply chain management expertise ODM & product development strength Review credit terms provided to buyers Cut non-essential costs Seek M&A opportunities Acquire int l certifications Define & develop USP 3

4 Business at a Glance A leading B2B media company facilitating China trade Total Solution Online marketplaces Exhibitions Magazines Founded in 1970 HQ: Hong Kong 4,000 team members 69 locations 44 in China Financial Strength $203M Revenue* $50M Cash from Operations* $183M Cash and Securities** No bank or long term debt** * TTM ending September 30, 2008 ** As of September 30, 2008 Revenue Sources* 97% from suppliers for marketing/advertising services By media: 44% online 28% exhibitions 25% print 3% other 64% China, 36% Rest of the World 13% Chinese language media * TTM ending September 30,

5 Media for Global Trade Community: 196,000 verified and unverified suppliers Key Driver: Verified suppliers with the ability to export 15 VERTICAL MARKETS - Auto Parts & Accessories - Baby & Children s Products - Computer Products - Consumer Electronics - Electronic Components - Fashion Accessories - Garments & Textiles - Gifts & Premiums - Hardware & DIY - Home Products - Machinery - Security Products - Sports & Leisure - Telecom Products - Underwear & Swimwear Lead Generation: 43 million to suppliers through Global Sources Online alone annually Community: 790,072 active buyers worldwide (certified with E&Y) Key Driver: Professional buyers that import and outsource in volume 5

6 Media for China Trade Product Shipments 19 Vertical Markets - Electronic Engineering - Electronic Design - Electronics Manufacturing - Management - Consumer Products (15 verticals) Community: More than 1 million including registered online users and BPA audited subscribers Key Drivers: Need and demand for imported products; large and developing domestic B2B market Community: Overseas manufacturers of semiconductors and electronics equipment plus luxury consumer brands; domestic suppliers of consumer goods Key Drivers: Overseas and domestic companies want to penetrate the China market 6

7 Business Strategy: Online, Trade Shows and Magazines Online Competitive advantages of strategy Cross-marketing Barriers to entry Serve entire buying process Compete for suppliers entire budget Print Cross marketing Trade shows 7

8 Total Solution for Export Marketing 8

9 Powerful Differentiation: Addressing Key Buyer Needs TV Specialization Specific to industry, products groupings and categories Comprehensive Comprehensive search results Verified suppliers, unverified suppliers and the web Global Sources Verify Star-Ranking Supplier ranking system based on amount of information provided by other parties Verification Verification content from Global Sources, Verify, and Bureau Veritas 9

10 Powerful Differentiation: Larger, More Professional Buyers Hundreds of Private Sourcing Events annually for large buyers Large & medium-sized buyers generally do not consider SME suppliers due to lack of export experience and capacity 80:20 rule generally applies to importing. For USA: Top 3000 importers - 67% of total imports 1 Top 100 importers - 30% of sea imports 2 Top 20% of importers - at least 75% of total imports 3 1 Source: U.S. Customs & Border Control 2 Source: Journal of Commerce 3 Source: Global Sources estimate from U.S. Customs data 10

11 Significant Growth in Buyers from Emerging Markets Russia 36% West Europe 43% Brazil 63% India 66% 16% Average growth rate Turkey 33% East Europe & CIS 35% Middle East 41% 0% 20% 40% 60% 80% Q3 2008, year-on-year growth in Global Sources active buyer community 11

12 Fast Growing Buyer Community and Requests for Information Steady Growth of Buyers (In hundred thousands) Rapid Increase in Requests for Information (RFIs) (In millions) ,072 Q Q Q Q ,942,386 Q Q Q Q

13 Positioned for Long-term Growth Online Market Penetration with Global Sources Online 2.0 Promoting supplier verification benefits and market leadership New Product Development 29 shows in 2009 versus 27 in 2008 Expansion in China s Domestic B2B market Develop new shows launched in Shanghai in 2007 Begin to monetize China Global Sources Online 13

14 Infrastructure Supporting Growth Sales representation in China Expanding field and telesales representation Content development Continuing expansion of content on the English and Chinese versions of Global Sources Online Marketing to suppliers and buyers For online media and new and developing trade shows 14

15 Millions Strong Balance Sheet $350 $300 $250 $200 $150 $100 $50 Cash, Securities, Deferred Income and Total Assets $ as at September 30,2008 Total Assets Cash and Securities Total deferred income and customer prepayments A Tender Offer of 6.25M shares at $8.00 per share was completed in 4Q08. This will be reflected on the December 31, 2008 balance sheet and paid in early At September 30 th, 2008 Cash and securities: $183M 79% in U.S. treasury bonds 60% of total assets Deferred income: $99M 49% of TTM revenue High visibility from longterm contracts, advance collections & recurring revenue $74.5 million in real estate assets based on the cost at time of purchase 15

16 Driving Online Growth 50% 40% 30% 20% 10% 0% 42% Revenue Mix by Line of Business (2H08 is estimate) 27% 28% 49% 26% 22% 2H07 2H08* Online Exhibitions Print Online expected to exceed 49% of total revenue Online growth accelerating + 21% in Q407 27% Q108 30% in Q208 19% in Q308 24% (estimated) for 2H08 Exhibitions revenue growth moderating and print revenue declining + versus same period previous year * Estimates related to guidance figures Note: Growth % compared to same period previous year. 16

17 Guidance Q Expectations* Revenue $63.0M to $64.0M Up 4-5% versus Q407 GAAP EPS $ $0.13 Compared to $0.17 in Q407 Non-GAAP EPS $0.14 to $0.15 Compared to $0.26 in Q407 Second Half of 2008 Expectations* Revenue $101.0M to $101.5M Up 7% versus 2H07 GAAP EPS $0.17 to $0.18 Compared to $0.28 in 2H07 Non-GAAP EPS $0.18 to $0.19 Compared to $0.39 in 2H07 * As of November 13, Reaffirmed February 4, Non-GAAP net income excludes non-cash stock-based compensation, gains or losses on acquisitions and/or impairment charges. Non-GAAP EPS is defined as non-gaap net income divided by the weighted average shares of diluted common shares outstanding. 17

18 Investment Highlights Well positioned to give Chinese and other Asian suppliers opportunities to market to global buyers Full range of media addresses all primary customer needs Well known and respected brand relied on by large and mediumsized global buyers Very strong balance sheet and business model with high financial and operating flexibility GSOL is a proxy for investing in B2B China trade 18

19 China Internet Peer Comparison As at February 6,

20 Online Magazines Trade shows Research (NASDAQ-GS: GSOL) Thank You

21 Strategic Responses to the Current Crisis Only 20% of China respondents look to cost cutting as their main strategy More hope to move upmarket through branding (21%) or improved product quality and efficiency (22%) Expand new markets 10% Improve quality/efficiency 23% Expand online 16% Cut costs 20% Few depend on China domestic market (10%) Source: Chief Executive China online poll of responding China manufacturers (domestic & export) Jan 21 Feb 4, 2009 Expand domestic 10% Branding & added value 21% 21

22 2009 Outlook for Manufacturers A Chief Executive China survey, January 2009 Based on 784 responses to a survey of C-level users within the Chief Executive China community 59% of total respondents are exporters 22

23 2009 Biggest Expected Growth Markets 23

24 Primary issues affecting competitive strength 24

25 Expected Domestic Sales Change in % expect flat or declining domestic sales for FY

26 Tender Offer On November 13, 2008, the company announced a cash tender offer to purchase up to 6.25 million shares of its outstanding common shares at a price of $8.00 per share, or up to $50 million. The offer to purchase shares commenced on November 21, 2008 and expired at 12:00 midnight, Eastern Time, on December 19, At December 19, 2008, the company s shares closed at $7.51 per share, compared to $5.54 per share on November 21, 2008, the date the tender offer commenced. Approximately 38.8 million shares of the company s common shares were properly tendered and not properly withdrawn. The final pro ration figure is %. In 2009, the company has issued payment of $8.00 per share for all pro-rata shares that were properly tendered and not properly withdrawn. The balance sheet as of December 31, 2008 will reserve for this payment. 26

27 Trade show schedule for 2009 January February March Q1 CSF Electronics & Components (HK) Q2 CSF Fashion Accessories (HK) CSF Underwear & Swimwear (HK) CSF Home Products (HK) CSF Gifts & Premium (HK) IIC China Conference & Exhibition (Shenzhen) IIC China Conference & Exhibition (Xian) IIC China Conference & Exhibition (Beijing) IIC China Conference & Exhibition (Shanghai) April May June CSF Baby & Children s Products (HK) ISF Home Products (HK) CSF Electronics (Dubai) CSF Fashion Accessories (Dubai) CSF Home Products (Dubai) CSF Gifts & Premium (Dubai) ISF Home Products (Dubai) July August September Q3 IIC Taiwan Conference & Exhibition (Taipei) IIC China Conference & Exhibition (Wuhan) IIC China Conference & Exhibition (Dongguan) IIC China Conference & Exhibition (Chengdu) October November December CSF Electronics & Components (HK) CSF Q4 Home Products (HK) CSF Gifts & Premium (HK) CSF Baby & Children s Products (HK) CSF Security Products (HK) CSF Fashion Accessories (HK) CSF Underwear & Swimwear (HK) CSF Electronics & Components (India) CSF Hardware & Building Materials (India) 27 * New shows in 2009 are highlighted in red

28 Q4 and 2 nd Half 2008 Guidance GAAP to Non-GAAP Reconciliation In U.S. Dollars Million, Except Number of Shares and Per Share Data Actual Three months ended September 30, 2008 GUIDANCE GUIDANCE Three months Six months ended December 31, ended December 31, Revenue $37.58 to $63.00 to $64.00 $ to $ GAAP EPS $0.05 to $0.12 to $0.13 $0.17 to $0.18 Non-cash stock based compensation expense / (credit) (Note 1) ($0.01) - - ($0.01) ($0.01) Forecast impairment on available-for-sale securities (Note 2) - $0.02 $0.02 $0.02 $0.02 Non-GAAP diluted net income per share $0.04 to $0.14 to $0.15 $0.18 to $0.19 Total shares used in non-gaap diluted net income per share calculations 47,506,782 47,526,076 47,526,076 47,467,793 47,467,793 Notes: (1) Non-cash stock based compensation expense / (credit). (2) Forecast impairment on available-for-sale securities. 28

29 Income Statement YTD SEPT YTD SEPT YEAR YEAR y-y (in US$ millions except number of shares and % data) growth % growth % Revenues Online Print (0) Exhibitions Miscellaneous Total revenue Operating expenses (122.2) (105.4) (16) (159.1) (138.4) (15) Operating income Interest and dividend income (47) Gain on sale of available-for-sale securities Gain on sale of shares to minority shareholder and interest income thereon (100) Loss on investment, net 0.0 (1.8) 100 (1.8) (0.7) (157) Impairment of goodwill and intangible assets (3.1) 0.0 (100) Foreign exchange losses, net (1.3) (0.8) (63) (1.2) (0.8) (50) Income before income taxes (13) Income tax expense (0.6) (0.6) 0 (0.3) (0.9) 67 Non-Controlling Interest (1.5) (1.7) 12 (2.1) (1.9) (11) Cumulative effect of change in accounting principle (100) GAAP Net income (14) GAAP Net income per diluted share (15) Total shares used in diluted net income per share calculations (GAAP Net Income) 47,448,286 46,910,979 46,986,861 46,538,312 29

30 Q GAAP to Non-GAAP Reconciliation In U.S. Dollars Thousands, Except Number of Shares and Per Share Data Three months ended September 30, Nine months ended September 30, GAAP EPS $ 0.05 $ 0.11 $ 0.40 $ 0.34 GAAP Net Income $ 2,275 $ 5,133 $ 18,900 $ 15,851 Non-cash stock based compensation expense / (credit) (Note 1) (379) 914 (482) 4,207 Loss on investment, net (Note 2) ,846 Non-GAAP Net Income $ 1,896 $ 6,047 $ 18,418 $ 21,904 Non-GAAP diluted net income per share $ 0.04 $ 0.13 $ 0.39 $ 0.47 Total shares used in non-gaap diluted net income per share calculations 47,506,782 47,090,456 47,448,286 46,910,979 Notes: (1) Non-cash stock based compensation expense / (credit). (2) An impairment charge of approximately $2.3 million on the company's HC International investment, net of $0.5 million received pursuant to indemnification obligations of the vendor under the purchase agreement for HC International investment. 30